Qumu Announces First Quarter 2020 Results

Company reports solid first quarter results, provides update on business and market for enterprise video amid COVID-19 pandemic

Conference Call Today, May 5, 2020 at 4:30 p.m. ET

Minneapolis, MN – May 5, 2020 – Qumu Corporation (Nasdaq: QUMU) today reported financial results for the first quarter ended March 31, 2020, reflecting revenue of $6.2 million, net loss of $(2.7) million, and adjusted EBITDA loss, a non-GAAP measure, of $(1.2) million. The Company ended the first quarter 2020 with cash of $8.4 million.

Management Commentary

“Scalable, secure, self-service video technology for enterprises is the key value proposition that Qumu provides to its customers. Beginning in mid-March 2020, enterprises around the world implemented work-from-home and travel restrictions in response to COVID-19. Certainly, Qumu has done the same for the health and safety of its global workforce and I want to recognize the Qumu team for their dedication to serving our customers around the world and around the clock,” said Vern Hanzlik, Qumu President and CEO.

“We believe the COVID-19 pandemic has become a change agent within enterprises, driving organizations to expand the use of video for business continuity and effectively resetting communication in a new normal,” continued Hanzlik. “Video adoption has fueled an exponential increase in usage of our platform in the last weeks of the quarter which continues into the current quarter. We are also experiencing very strong demand from prospects and existing customers as enterprises push to enable and upgrade their video capabilities.”

“Amongst the COVID-19 related opportunities closed during the last week of Q1 was one of significance,” added Hanzlik. “An existing customer signed an expansion agreement to harden their video infrastructure in support of 325,000 employees and additional external stakeholders. Although we were only able to recognize a small portion of the multi-million dollar contract as revenue in Q1, significant revenues will be delivered in Q2, as well as additional revenue in the second half of 2020. Given our COVID-19-driven customer deals in Q1, and our visibility to our near-term pipeline, we have confidence in our prospects for revenue growth in 2020.”

First Quarter 2020 Financial Highlights

First quarter 2020 revenue was $6.2 million, compared to $7.1 million for the first quarter 2019. Sales mix and the timing of revenue recognition contributed to the decrease, as the first quarter 2019 included revenue from large term software license renewals, resulting in a year-over-year term software license revenue decrease of $1.5 million. Revenue from term software licenses is recognized upon fulfillment—that is, up front—in accordance with ASC 606.

Net loss was $(2.7) million, or $(0.20) loss per basic share and $(0.21) loss per diluted share, compared to $(950,000), or $(0.10) loss per basic and diluted share, for the first quarter 2019. First quarter 2020 adjusted EBITDA loss was $(1.2) million, compared to adjusted EBITDA income of $210,000 for the comparative 2019 period. Net loss and net loss per share for the first quarter 2020 were unfavorably impacted by transaction-related expenses totaling $811,000, included in general and administrative expenses, related to Qumu’s merger agreement with Synacor, Inc., which is anticipated to close mid-2020. The transaction-related expenses represent an adjustment in the determination of adjusted EBITDA (see Supplemental Financial Information below).

Other Financial Highlights

  • Subscription, maintenance and support revenue was $4.2 million and $5.6 million for the first quarter 2020 and 2019, respectively, as the first quarter 2019 included large term license renewals, for which the revenue is recognized up
  • Gross margin was 66.5% for the first quarter 2020, compared to 78.3% for the first quarter 2019, as the sales mix for the 2020 period included a higher mix of appliance revenue, which generally has lower

margins, and the mix for the 2019 period included a higher mix of term license revenue, which generally has higher margins. Additionally, the first quarter 2020 included outsourced professional services expense for certain customer-specific projects in the quarter, which negatively impacted services gross margin.

  • Cash and cash equivalents totaled $8.4 million as of March 31, 2020, compared to $10.6 million as of December 31,
  • Customer retention was 90% for the first quarter
  • Subsequent to March 31, 2020, Qumu entered into an agreement to cancel its outstanding warrant to ESW Holdings, Inc. effective May 1, 2020, for a deferred purchase price of $1.83 million reflected in a note maturing on April 1, 2021 and bearing no interest. The warrant to ESW Holdings, Inc. was for the purchase of up to 925,000 shares of Qumu’s common stock and was subject to a minimum cash settlement provision in the event of a change of control transaction referred to as a Fundamental Transaction, which included Qumu’s proposed merger with Synacor, Inc. The payment obligations of the note will be accelerated upon a Fundamental Transaction, which includes Qumu’s proposed merger with Synacor, , and Qumu would be required to pay an additional $150,000 to ESW Holdings, Inc. upon the closing of a Fundamental Transaction. The fair value of the warrant instrument has historically been reported as a liability in Qumu’s consolidated financial statements, and, for certain historical reporting periods since its issuance—including the first quarter 2020—the warrant instrument was dilutive in the calculation of earnings per share.

Business Outlook

As Qumu considers its revenue outlook for the balance of 2020, we are cautious due to the unknown financial impact that COVID-19 will have on economies and enterprises around the world. However, based on the strength of first quarter 2020 and second quarter 2020 to date customer contracts and Qumu’s pipeline, management expects 2020 revenue to be approximately $28 million as compared to $25.4 million in 2019. Qumu will continue to assess the revenue outlook for the second half of the year as more information becomes available on customer ordering trends and the economic disruption caused by COVID-19.

Conference Call

Qumu President and CEO Vern Hanzlik and CFO Dave Ristow will host a conference call today (May 5, 2020) at 4:30 p.m. Eastern time.

U.S. Dial-In Number: 877-456-6914 International Dial-In Number: 929-387-3794

Investors can also access a webcast of the live conference call by linking through the Investor Relations section of the Qumu website at https://qumu.com/en/investor-relations/. The webcast will be archived on Qumu’s website for one year.

Non-GAAP Information

To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company uses adjusted EBITDA, a non-GAAP measure, which excludes certain items from net loss, a GAAP measure. Adjusted EBITDA excludes items related to interest income and expense, the impact of income-based taxes, depreciation and amortization, stock-based compensation, change in fair value of warrant liabilities, foreign currency gains and losses, other non-operating income and expenses, and transaction-related expenses.

The Company uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the Company’s performance. The Company believes that adjusted EBITDA is useful to investors because it provides supplemental information that allows investors to review the Company’s results of operations from the same perspective as management and the Company’s board of directors. Non-GAAP results are presented for supplemental informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.

See the attached Supplemental Financial Information for a reconciliation of net loss, a GAAP measure, to adjusted EBITDA, a non-GAAP measure, for the three months ended March 31, 2020 and 2019.

About Qumu

Qumu Corporation (Nasdaq: QUMU) is the leading provider of best-in-class tools to create, manage, secure, distribute and measure the success of live and on-demand video for the enterprise. Backed by the most trusted and experienced team in the industry, the Qumu platform enables global organizations to drive employee engagement, increase access to video, and modernize the workplace by providing a more efficient and effective way to share knowledge.

Investor Contact
Dave Ristow
Chief Financial Officer
Qumu Corporation